Even during my bleakest financial periods, I was able to make payments to my creditors on time. Not everyone is so fortunate. Some people give up and eventually lose track of where they owe money. Nick wrote last week wondering what to do when you’re done running and ready to take responsibility for your debts:

I’ve made some bad choices financially in the past, and now I know that I owe companies money, but I’m not sure who or how much. How do I go about finding out so I can begin to pay them off and get out of debt?

Nick should start by requesting a copy of his free credit report from AnnualCreditReport.com, an official government-endorsed site from the credit bureaus. His credit report will list the name and contact information for each company to which he owes money. It will also note approximately how much he owes and how far behind on payments he is.

Next, Nick should call each company to verify the amount owed and to explain his situation. This will probably feel awkward at first, but it needs to be done. He must be armed with accurate information. (Update: Commenters suggest contacting creditors one at a time, starting with the smallest debt. “Wake them up” slowly.) As Nick begins to repay his debt, he has a couple of choices.

  • He can seek help from a consumer credit counseling service. In the Get Rich Slowly discussion forum, Daisy provided an account of her positive experience with credit counseling. She notes, however, that some people have bad experiences. For a more extensive discussion, check out this old Ask Metafilter thread.
  • He can do it himself. It is possible to get out of debt on your own — I’ve done it, and so have many others — but it takes hard work and discipline. I urge Nick to consider Dave Ramsey’s debt snowball method. Focus on paying the smallest bill first, and then move on to the next smallest. Eliminate small debts quickly. This isn’t mathematically ideal, but it will provide a psychological boost, and that’s probably more important in this case.

The U.S. Federal Trade Commission warns that there are a lot of scammers ready to prey on people with poor credit histories. They make false promises while taking money from you that might have been used to pay down debts. Beware of offers that seem too good to be true. The FTC says that self help may be best, and they give tips on how to approach creditors.

Though I struggled to overcome massive debt, I’ve never actually been in Nick’s shoes before. Have you? How did you locate your creditors? How did you contact them? Were they willing to work with you? Did you get outside help? Have you used a consumer credit counseling agency? What advice can you offer Nick as he prepares to confront his debt?